A new revenue forecast released Thursday shows that while state spending continues to outpace revenues, the budget will not fall into the red by the end of the decade as predicted last April.
State fiscal analysts increased their revenue forecasts by about $260 million for 2026 and 2027 combined, although state spending is projected to exceed revenues by more than $900 million for those two years combined as well, a new budget profile shows.
However, a combination of increased Medicaid matching funds and less education spending because of a declining student population means the state’s ending balance is not projected to run a deficit before the end of the decade as anticipated earlier this year.
“The state’s in relatively good shape,” Budget Director Adam Proffitt said.
“There’s been a lot of job growth. Revenues are increasing,” he said, speaking for himself and not the group that develops the revenue estimates.
“You’re never going to find me comfortable in a situation where we’re overspending by $300 million every single year,” he said.
“If you have too many years in a row, it doesn’t matter what the surplus is, at some point that goes away,” he said.
The new budget profile shows the state’s ending balance fall from $2.3 billion in the current 2026 fiscal year to $1.2 billion in fiscal 2030 as the state spends more than it takes in. The profile ends in 2030.
By comparison, the budget profile issued last April showed a similar pattern of deficit spending with the state’s ending balance falling $730 million into the red by 2029.
Proffitt noted that the new budget profile shows education spending will drop by about $160 million every year going forward for the next five years because there are 10,000 fewer students projected.
Further, the federal Medicaid match is expected to increase by about $50 million a year, meaning the state will spend $250 million less in general fund dollars on the health care program for the less affluent over the next five years.
“I’m happy, obviously, that things are in better shape in the out years,” he said.
“But that’s largely due to the decrease in the cost for K-12, but also an increase in…the federal share for the Medicaid program.
“The gap has closed, but it’s largely due to factors that are outside of our control right now.”
